Advanced thermoelectric technologies can drastically improve energy efficiencies of industrial infrastructures, solar cells, automobiles, aircrafts, etc. When a thermoelectric device is used as a solid-state heat pump and/or as a power generator, its efficiency depends pivotally on three fundamental transport properties of materials, namely, the thermal conductivity, electrical conductivity, and thermopower. The development of advanced thermoelectric materials is very challenging because these transport properties are interrelated. This paper reviews the physical mechanisms that have led to recent material advances. Progresses in both inorganic and organic materials are summarized. While the majority of the contemporary effort has been focused on lowering the lattice thermal conductivity, the latest development in nanocomposites suggests that properly engineered interfaces are crucial for realizing the energy filtering effect and improving the power factor. We expect that the nanocomposite approach could be the focus of future materials breakthroughs.